The U.S. Department of Labor (DOL) has recently proposed a new rule that could bring significant changes to the salary threshold for exempt employees under the Fair Labor Standards Act (FLSA). This proposal, announced in August 2023, aims to update the existing regulations by raising the salary threshold for exempt workers and introducing an automatic updating mechanism. In this blog, we will take a closer look at the 2023 FLSA Overtime Proposal and its potential impact on employers and employees.
The main highlight of the 2023 FLSA Overtime Proposal is the increase in the salary threshold for exempt employees. The DOL suggests raising the standard salary level to $1,059 per week, approximately $55,000 annually. This proposed increase from the current rate of $684 per week ($35,568 a year) could affect around 3.6 million employees in the United States.
Other notable items in the proposal include:
- No changes to the current duties test: The DOL does not plan to make any modifications to the existing duties test that employees must meet to qualify for exemption. These tests pertain to various job categories, such as executives, administrative workers, professionals, computer employees, outside sales workers, highly compensated employees, blue-collar workers, and first responders.
- Expanded application of the salary level: The proposed rule suggests applying the standard salary level to Puerto Rico, Guam, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands. It also suggests increasing the special salary levels for American Samoa and the motion picture industry.
- Increase in highly compensated employee threshold: The proposal suggests raising the highly compensated employee total annual compensation requirement to the annualized weekly earnings of the 85th percentile of full-time salaried workers nationally. Based on current data, this would amount to $143,988 per year.
- Automatic updating mechanism: To ensure timely adjustments based on current earnings data, the DOL proposes implementing an automatic updating mechanism for the salary thresholds every three years.
Public Comment Period:
Once the notice of proposed rulemaking is published in the Federal Register, it will be open for public comment for 60 days. Employers and other stakeholders will have the opportunity to provide feedback and voice their concerns or support for the proposed changes. It is important for employers to stay alert and engaged during this period to have their opinions heard.
If the 2023 FLSA Overtime Proposal becomes finalized, it could have significant implications for both employers and employees. Employers would need to review their salary structures, ensure compliance with the updated salary thresholds, and potentially adjust employee classifications accordingly.
Additionally, employers operating in multiple jurisdictions should be aware that compliance with employment laws extends beyond federal regulations. Local laws and regulations may have their own overtime requirements and salary thresholds, making it essential for employers to navigate a complex compliance landscape.
The 2023 FLSA Overtime Proposal represents a potential shift in the regulations governing exempt employees' salary thresholds. As employers await the final decision, it is crucial to stay informed and prepare for potential changes to ensure compliance with wage and hour laws. Employers should closely monitor updates from the DOL, engage during the public comment period, and consult legal professionals to understand the specific implications for their organizations.
Disclaimer: This blog is intended for informational purposes only and should not be considered legal advice or counsel. It is important to consult with legal professionals for specific guidance related to your unique circumstances.